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Net effects of Net Neutrality: The case of Amazon’s Twitch.tv

Author

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  • José Tudón

    (Department of Economics, The University of Chicago, 1126 E. 59th St., Chicago, IL 60637, USA)

Abstract

Net neutrality encourages content provision but also creates congestion externalities from the increase in data traffic. I study the consequences of net neutrality in Twitch.tv, a popular internet platform, by estimating a two-sided market model that considers the interactions between content provision, its consumption and congestion. The platform is non-neutral because it gives preference to the most popular content providers by compressing their data, which makes them accessible to more consumers. I use the estimated preferences and technological parameters to study the counterfactual where net neutrality is imposed in the platform. Consumer welfare would drop 3 percent. The platform would need to significantly increase its investment in its physical infrastructure to compensate consumers for the drop. The drop will be underestimated if congestion is ignored. Content provision does not increase but its quality drops.

Suggested Citation

  • José Tudón, 2017. "Net effects of Net Neutrality: The case of Amazon’s Twitch.tv," Working Papers 17-14, NET Institute.
  • Handle: RePEc:net:wpaper:1714
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    References listed on IDEAS

    as
    1. Olsen, Randall J, 1980. "A Least Squares Correction for Selectivity Bias," Econometrica, Econometric Society, vol. 48(7), pages 1815-1820, November.
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    5. Caves, Kevin W., 2012. "Modeling the welfare effects of net neutrality regulation: A Comment on Economides and Tåg," Information Economics and Policy, Elsevier, vol. 24(3), pages 288-292.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Net neutrality; Congestion externalities; Internet; Two-sided markets;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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